Asian Businesses Prefer Locals To Expats

Conference Board Report Finds 'Problems With Expatriates'

April 13 2006 - A new report from the Conference Board
finds that major Asia-Pacific companies are searching more intensively for executives
living in the region, rather than relying on expatriate executives brought
in from other parts of the world.

55 organizations based in the Asia-Pacific region were surveyed for the report.
Almost four-fifths (79%) are seeking to develop leadership talent within the region and equal
percentages are either maintaining (47%) or increasing (47%) the financial resources
devoted to leadership development initiatives despite widespread budget cuts elsewhere.

Respondents to the survey identified the following actions being
taken to develop a stronger leadership supply:

Identifying talent gaps and company requirements (92%)

Improving talent assessment (91%)

Involving the CEO in talent development (91%)

Placing priority on developing and retaining high potentials (90%)

Reinforcing accountability of leaders for development (84%)

Developing specific Asia-Pacific development programs (76%)

Survey participants cited the following methods as those being used in their organizations to develop business leaders:

Internal management development programs (44%)

Company training programs (40%)

International assignments greater than two years (36%)

Mentoring and/or coaching (33%)

Participation in cross functional international teams (33%)

Action learning assignments (26%)

The report also shows that many international businesses are trying to
cut the number of expatriates and international assignees occupying longer
term (in contrast to developmental) leadership roles. Companies in the region are comming
to the conclusion that home-grown executives impact more effectively on company
performance than expatriates and cost less. In fact, with salary supplements and
additional benefits, such as home leave, school tuition and accommodation subsidies,
expatriates can cost at least twice as much as a local executive.

Andrew N. Bell, Program Director for the Asia-Pacific HR Council and author of the report said:

"One reason for reducing expatriates and international assignees is based
on the premise that in the lifecycle of most businesses, the localization of leadership
has a positive impact on performance. This positive impact results from a range of
factors in which local leadership is more likely to have a deeper understanding and
familiarity with the needs and expectations of local consumers and clients, local business
infrastructure such as distribution channels and external relations, including with the
government and media. Also, language may be a critical factor. An inability to work in
the local language can be a serious impediment in some aspects of business operations."

Asia-Pacific businesses face two challenges:

Local supply limitations There is intense competition for the
limited supply of local leadership talent. For example, in some sectors, turnover rates in
Shanghai and Bangalore are greater than 40% per year. Salary levels can also be high.
Some talented executives in Shanghai may receive absolute salary levels that are equal to or greater than their
counterparts in Singapore or London.

Expatriate proliferation leadership competence and
technical expertise may have to be imported during initial investments in a new market or
periods of significant expansion and large-scale capital investments. The process of developing
local replacements often takes longer than planned.

Survey participants identified the following competencies
as being relevant to success in the Asia-Pacific region:

cultural understanding

adaptation

collaboration

teamwork

communication

alignment across borders

people development

coaching

Barriers to developing leaders in the Asia-Pacific region mentioned by companies
included:

the capabilities of HR professionals in some locations;

mismatches between location of talent and business opportunities;

preservation of established company cultures, networks, and behaviors;

low mobility within region for some; and

competition for talent leading to high turnover and escalating salaries.

The report is titled Leadership Development in Asia-Pacific: Identifying and Developing
Leaders for Growth Report #1387-06-WG, The Conference Board. Information about
ordering this publication can be obtained from The Conference Board website at
http://www.conference-board.org/.